Alternative Specifications of Advertising in the Rotterdam Model

Mark G Brown and Jonq-Ying Lee

European Review of Agricultural Economics, 1993, vol. 20, issue 4, 419-36

Abstract: This paper examines several approaches to introduce advertising in systems of demand equations. The Rotterdam model is used to analyse the effects of advertising in an unrestricted specification and three restricted specifications--advertising affects demand alternatively through (1) marginal utilities, as in studies by Duffy (1987, 1989, 1990) and Selvanathan (1989b); (2) scaling parameters which can be viewed as indicators of product quality, and (3) translation parameters which can be viewed as indicators of basic needs. A test to choose among the alternative specifications is provided and the methodology is applied to data on demand for fruit juice products. Copyright 1993 by Oxford University Press.

Date: 1993
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